Rogue Valley Manor residents will sue PRS

Rogue Valley Manor residents say they are through talking with Pacific Retirement Services.

By GREG STILES

Rogue Valley Manor residents say they are through talking with Pacific Retirement Services.

After two months of mediation, the Manor residents' steering committee broke off negotiations and has served notice it will file a class-action suit in Jackson County Circuit Court asking for $30 million because of what it claims are excessive management charges by PRS.

Residents of the retirement community have been at odds with the Manor's corporate parent for months, saying that PRS and its board have exceeded their authority and removed virtually all decision-making power from the Rogue Valley Manor's own board.

Manor residents, who overwhelmingly endorsed the legal action last week, rapidly raised a legal war chest of hundreds of thousands of dollars late last summer.

In a 50-page draft complaint, residents seek removal of PRS control over the Manor; rescission of an Aug. 24 bylaws amendment that reduced the Rogue Valley Manor board from nine to three members; and reinstatement of dismissed Manor board members or appointment of an independent board that cannot be appointed or removed by PRS.

They also are asking the court to give the Rogue Valley Manor board the right to select the community's executive director and for the return of Kevin McLoughlin to that role. Further, the residents request an accounting of "excessive management and related fees collected by PRS" and action to prevent PRS from transferring or dissipating the Manor's assets.

In August, after a judge declined to intervene on residents' behalf, McLoughlin was fired from his post and PRS dismissed seven of nine Manor board members. PRS Chief Operating Officer Mike Morris assumed McLoughlin's duties on an interim basis.

The dispute first arose over concerns by Manor residents that they were being charged excessive fees to cover expenses related to PRS properties beyond the Manor. PRS operates 10 retirement facilities in five states as well as other operations, including a hotel and two golf courses in Medford. The Manor residents say that when PRS was established, it was agreed that management services would be charged at a break-even rate, with no profits to PRS.

Last week, during an hour-plus session with several hundred Manor residents, Portland attorney David Markowitz said the concerns over excessive fees were justified.

"The prior board's investigation, and the investigation by my law office and our forensic accountant, all demonstrate that there are significant profits being made by PRS on its management fees for its governance over the Rogue Valley Manor," Markowitz said in a video of the meeting that was made available to the Mail Tribune. "We have alleged ... it is an amount in excess of $1 million a year that has continued for years and years and years. Some years, in excess of $1.5 million of profit that has been used by PRS not for the benefit of Rogue Valley Manor but in order to fund its ventures elsewhere, including its losses that it has sustained in its for-profit failed activities or failing activities elsewhere."

Residents raised five issues as they began a series of mediation efforts with PRS officers that ended Nov. 16. The issues have been boiled down to three: PRS' governance, its fees and how it handles the money, and McLoughlin's future.

"I'm disappointed that no agreement has been met," Markowitz said.

Morris, who was in attendance for at least part of the meeting, told residents PRS intended to present its side of the matter within two weeks.

"There will be additional information beyond what is discussed here," Morris said. "We look forward to very open discussion and being able to hear both sides."

After PRS dismissed dissident Manor board members this summer, residents are seeking assurances that their board would have some authority. But Markowitz said that is not acceptable to PRS.

"Most importantly they want to retain absolute control of the board," Markowitz said. "Not only selection of the nine (board members), but in the ability to terminate."

While Manor residents are pressing PRS on several issues, they seem most upset over the dismissal of McLoughlin, who was summarily fired in August and told not to set foot on PRS property after he cleaned out his office.

"You would think that if we could get a truly independent board that wouldn't be subject to termination then that board could rehire whoever they wanted for an executive director," Markowitz said. "But PRS so far has said no, which is why so many of our group is pessimistic of the governance issue ever being resolved. Because they (PRS) want to maintain that ultimate control over decision making."

The biggest issue leading to the lawsuit, Markowitz said, was whether McLoughlin would be returned to his position.

"What we've been told repeatedly is that Kevin will not be returned voluntarily," Markowitz said. "The way we put it in the last meeting, if you had to choose between a lawsuit between the Rogue Valley Manor residents and (rehiring) Kevin, which would you choose, PRS? They chose the lawsuit. This issue is the one we can find no compromise, no give, no change in PRS' position."

It remains unclear why McLoughlin was removed, but Markowitz told the residents that the PRS board was not involved in the dismissal.

"The PRS board continues, we believe, to not know why Kevin's supervisor fired him and they refuse to talk to Kevin," Markowitz said.

"Those of you who have been involved in business in your life understand that personnel decisions are very confidential in nature," said Morris, who is the son-in-law of former PRS Chief Executive Officer Tom Becker. "The likelihood of having full disclosure of the details of an employee's termination would need to come from the employee directly and not from the employer."

Pressed by a noticeably hostile crowd, he defended the firing without revealing details. He did say the termination was not solely the decision of PRS Chief Executive Officer Brian McLemore.

"The decision to make personnel changes is never a unilateral decision in our organization, it's never made by one individual," Morris said. "It is reviewed by our human resources department and our legal department. In this case it is reviewed by a team of professionals to make that decision."

Ultimately, the Manor residents were told by their attorneys, the only way Rogue Valley Manor residents will get their way is if they prevail in court.

"We recognize litigation is difficult and not their first choice, but it's their only choice for the independence they are entitled to at this point," said Shannon Armstrong, also an attorney with Markowitz, Herbold, Glade & Mehlhaf.